Introduction

I chose Switzerland for my country report because it is a country in the centre of Europe, not part of the European Union and yet has one of the most prosperous economies in the world. On the basis of which elements Switzerland is doing well economically, I will therefore study the development of its economy but also of its social components over the last few years. For example, it will be interesting to make a comparison with Switzerland’s neighbours, particularly Germany, Italy and France, to understand how and why Switzerland is a model economy.

Population map by canton

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Which cantons are the more (or less) populated?

Here is a map of *Switzerland* divided into **cantons**, showing the **total population** of each canton in **2018**. The canton of *Zurich* has the most inhabitants (**1520968 inhabitants**) and the canton of *Appenzell Innerrhoden* the least with only **16145 inhabitants**. *Switzerland* had a population of **8.57 million** inhabitants in 2019.

Main economic indicators

This first part will deal with Switzerland’s economic indicators. It will help us to better understand the structure of the Swiss economy, in particular through the following points:

Analysis of the GDP growth in %

##    Min. 1st Qu.  Median    Mean 3rd Qu.    Max. 
## -7.2832  0.6143  1.8258  1.6789  3.0188  4.6020

This graph shows us the percentage change in GDP for Switzerland over the period from 1971 to 2018. As we can see, the change in GDP is sometimes negative, notably in 1975 due to the first oil crisis. Nevertheless, Switzerland sees the variation of its GDP most of the time positive. In fact, when the average over the period is calculated, the result is 1.67, and the median is 1.82. Moreover, since 2009, the variation of Swiss GDP has not had a negative variation.

Comparison with three european countries (France, Italy and Germany)

## # A tibble: 4 x 5
##   country     mean_gdp max_gdp min_gdp median_gdp
##   <chr>          <dbl>   <dbl>   <dbl>      <dbl>
## 1 France          2.19    6.34   -2.87       2.15
## 2 Germany         2.00    5.26   -5.70       1.97
## 3 Italy           1.73    7.13   -5.28       1.71
## 4 Switzerland     1.68    4.60   -7.28       1.83

As we can see, Switzerland doesn’t have the best results in terms of the variation of his GDP. In fact, Switzerland has the worst results compared to this others countries. It’ll be interesting to understand why Switzerland has a better economy than these 3 countries even if the results about the variation of his gdp are less good than his neighbours.

Analysis of the GDP per capita

We can see that the GDP per capita increase during this period, he was at 27594.63 in 1990 and at 68060.94 in 2018 (146,6% increase). It’ll be now interesting to compare with the three others countries to see if Switzerland is better in this category.

Comparison with three european countries (France, Italy and Germany)

Switzerland seems to be far away from his neighbours regarding the gdp per capita. Germany is in the second place with 53074.54 in 2018 (28% less than Switzerland), France in the third place with 45342.40 in 2018 (50% less than Switzerland). The conclusion of this analysis is that Switzerland is better when speaking about economic health into an individual citizens perspective.

Consumer Price Index

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

The consumer price index is used to demonstrate the price changes experienced by consumers in a given country. We can see from this graph that Switzerland is the best performer, since its consumer price index is lower than that of the other three countries. Nevertheless, the indices of the other three countries are very close to Switzerland. This means that their price stability is also good.

Switzerland’s trade

We can see from this graph that Switzerland spends most of its exports to the high-income economies. This means that it offers products with high added value. Nevertheless, this trend has been slightly declining since the early 2000s. This indicates a diversification of Switzerland’s offer and a willingness to reach new markets.

Switzerland imported little from low-income economies until the early 1990s. Since the 1990s, the trend has been upward. This is due to globalisation and also to the need to have access to products and raw materials at low prices. Thus, since 1990, imports from these economies have quadrupled.

Comparison between imports and exports

As said before, we can see that Switzerland imports a bit (19,24%) from low / middle economies in 2017 but this is really increasing since 1990. About the exports, Switzerland exports a lot to high-income economies (75,15%) in 2017 but this is decreasing since 2010. As a conclusion, we can say that Switzerland tend to import more from low / middle economies but also to export more to these economies. However, the most of exports / imports of Switzerland are made with high-income economies but the low / middle economies increase their parts during last decade.

Balance of payments

Switzerland has a positive balance of payments, which means that it exports more than it imports, and this is a sign of good economic health. It is interesting to note that the Swiss balance of payments has remained positive since the 1970s while the other three countries all posted negative balances at some point in the period 1970 - 2020. This demonstrates Switzerland’s trade stability over a long period of time. However, in this graph, Germany has the best balance of payments since 2005. France is the only country with a negative balance of payments in 2020.

Index of Economic Freedom

Switzerland ranks 4th out of 183 countries rated for all the scores obtained according to the criteria in the graph above. The closer the score is to 100, the more excellent the result is considered. Conversely, a score close to 0 represents a very poor result. We can see that Switzerland excels in terms of economic health, on the other hand, it performs less well on the criterion of government spending. These indicators highlight the fact that Switzerland is a very low-risk country for anyone wishing to develop a business there. Later in the analysis, we will see criteria specific to business development in Switzerland. Nevertheless, this first approach makes it possible to highlight the country’s stability in this area.

Main social indicators

This second part will deal with Switzerland’s social indicators, in particular to analyse well-being in this country. To this end, the following indicators will be studied:

How Switzerland deals with unemployment?

This graph shows the difference between the level of education and the related unemployment rate in Switzerland. Very logically, those with a higher level of education are at an advantage and those with a lower level of education are at a disadvantage. It will now be interesting to compare these unemployment rates with those of three other European countries to see whether Switzerland is doing well in terms of managing unemployment or not.

Comparison with three european countries (France, Italy and Germany)

As we can see from the graph, Switzerland has had a relatively stable unemployment rate since the early 2000s. An increase of about 2.2% in 18 years for those with a high or intermediate level of education and an increase of about 3.8% for those with a low level of education. Only Germany is doing better than Switzerland in terms of unemployment at the end of 2018 for those with a high or intermediate level of education. Nevertheless, the gap remains small, 1.6% for the advanced education category and 1.9% for the intermediate level. Switzerland is doing better than Germany in terms of employability in the low education category, with a 0.7% gap in favour of Switzerland.

In contrast, France and Italy are the worst performers, with unemployment rates for all education categories combined far higher than Germany and Switzerland. For example, the unemployment rate for the low and intermediate education categories is twice as high in France as in Switzerland in 2018. Italy shows similar results to France.

Finally, it is interesting to note that Germany has seen its unemployment rate fall since 2005, Switzerland remains stable, while France and Italy have seen their unemployment rates rise since 2006, although there has been a slight improvement over the last 5 years.

Expenditure on education

As we can see between these four countries, France is the country that spends the most on education in relation to its GDP. Switzerland is in second place. It is interesting to note that France spends more on education but that nevertheless its unemployment rate is much higher than Switzerland (see previous graph). Germany is in third place, very close to Switzerland. Italy is the country that spends the least on education in relation to its GDP in all years. Finally, this graph highlights the fact that Switzerland is the country with the lowest GDP (among the 4 countries compared) but that it is the country with the highest GDP per capita (see previous graph). To conclude, we can deduce that Switzerland’s expenditure on education is certainly lower than France’s, but that graduates will find work more easily and will benefit from higher salaries (although this must be balanced with the Consumer Price Index).

Foreign population

Switzerland is a country that welcomes many foreigners, especially to work, as is the case for many French people interested in the high salaries offered by this country. Switzerland therefore has a much higher ratio of foreigners than its European neighbours. Moreover, this can be explained by the fact that it is very complicated to be naturalized Swiss. It is, for example, easier in France. Thus, once naturalized, the ratio tends to fall since the person no longer counts as a foreigner. These two factors explain why the ratio for Switzerland is so high.

Intentional homicide ratio

Switzerland is the country with the lowest crime rate (compared to France, Italy and Germany). Indeed, its ratio shows a homicide rate of 0.33 per 100,000 inhabitants. This can be explained in part by the severity of the Swiss justice system but also by all the means put in place for the well-being of citizens. This is also why the country’s Social Progress Index is so high. Germany is doing as well as Switzerland in terms of the rate of homicides committed, France has a ratio twice as high as Switzerland and Italy three times as high, however, their statistics are still decent.

Risk of poverty or social exclusion

This indicator corresponds to the sum of persons who are: at risk of poverty after social transfers, severely materially deprived or living in households with very low work intensity. Persons are counted only once even if they are affected by more than one of these phenomena.

  • Persons are considered to be at risk of poverty after social transfers, if they have an equivalised disposable income below the risk-of-poverty threshold, which is set at 60 % of the national median equivalised disposable income.
  • Severely materially deprived persons have living conditions severely constrained by a lack of resources, they experience at least 4 out of 9 following deprivations items: cannot afford i) to pay rent or utility bills, ii) keep home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein equivalent every second day, v) a week holiday away from home, vi) a car, vii) a washing machine, viii) a colour TV, or ix) a telephone.
  • People living in households with very low work intensity are those aged 0-59 living in households where the adults (aged 18-59) work 20% or less of their total work potential during the past year.(Eurostat)

As we can see, Switzerland is the country (on a par with France) in which the risk of becoming poor and/or socially excluded is the lowest. This is a very good social indicator because it shows that the country puts forward means to fight against inequalities but above all to prevent individuals from being in a situation of social isolation.

In 2017, 112.8 million people in the EU lived in households at risk of poverty or social exclusion; 22.4 % of the population. (Eurostat)

Social progress index

“The Social Progress Index is a new way to define the success of our societies. It is a comprehensive measure of real quality of life, independent of economic indicators. The Social Progress Index is designed to complement, rather than replace, economic measures such as GDP.” (The Social Progress Imperative, 2018)

Switzerland is the country with the highest rate of social progress. This is a very good sign because, in addition to a very high GDP per capita, the social climate is also very positive (although the two are not related). However, the other three countries are also doing very well.

Main business indicators

According to “The Economist”, Switzerland ranks second out of 82 rated countries in terms of Business environment. This means that Switzerland is a country in which the environment is favourable for doing business. We will therefore look at the different sectors in which Switzerland is positioned, its different partners and some business-related indices to understand on what basis Switzerland is rated so favourably by “The Economist”.

Corruption Perceptions Index

The indicator is a composite index based on a combination of surveys and assessments of corruption from 13 different sources and scores and ranks countries based on how corrupt a country’s public sector is perceived to be, with a score of 0 representing a very high level of corruption and a score of 100 representing a very clean country.

The corruption index shows whether a country is reliable, especially for doing business there. It can be seen here that Switzerland has a corruption index of 85 (the highest of the 4 countries). This is a very good indication that the country is very little affected by corruption. Thus, potential investors can invest serenely in this country without the risk of seeing their funds disappear or having problems with a biased justice system.

Swiss industries

In 2018, there were 53010 companies in Switzerland in the primary sector, i.e. the sector consisting of the exploitation of natural resources (e.g. agriculture, fisheries, forestry, etc.). This sector accounts for only 9% of Swiss companies. The secondary sector represents 90483 companies, i.e. 15% of the total number of companies. This is the sector that deals with the transformation of raw materials from the primary sector. Finally, the tertiary sector is the sector representing the largest number of companies in Switzerland. Indeed, this sector accounts for 75% of all Swiss companies, i.e. 446760 service companies. This sector alone accounts for 73% of Switzerland’s GDP.

Industries that export the most by sector

The sector with the highest export earnings in Switzerland is the pharmaceutical sector, closely followed by the precious metals and gemstones sector. These two sectors account for the vast majority of exports, contrary to the generally accepted idea that Switzerland derives the majority of its income from exports through sales of high-end watches. This sector is ranked fifth with a value four times lower than the pharmaceutical sector. As far as the precious metals sector is concerned, this can be explained by Switzerland’s position with regard to gold, as Switzerland is the main hub of the world gold trade. Gold is purchased as a raw material, then refined in Switzerland and finally exported to other countries, which explains the very important position of this sector in Switzerland in terms of export value.

Business Partners Export

Switzerland’s preferred trading partner is Germany. The majority of Switzerland’s exports go to Germany, closely followed by the United States. These two partners alone account for 35.1% of Switzerland’s exports. Both countries are economically stable, however, such dependence can have negative consequences if the German or US economy slows down.

Business Partners Import

Once again, Switzerland’s two most important import partners are Germany and the USA. Nevertheless, compared to the previous graph, China is now in third place for imports, whereas it was in fifth place for exports from Switzerland. This is partly due to the price of labour in China, which is very competitive. Conversely, the fact that the majority of products exported from Switzerland to China are high value-added products and that the Chinese do not have the same purchasing power as in Europe (or the USA) explains the “low” rate of exports from Switzerland to China. Another interesting fact in comparison with the previous graph is the disappearance of Italy in this ranking of the top five import partners, which gives way to India.

Swiss industries with the most employees

The Swiss company with the most employees is Nestlé. Nestlé employs 323,000 people worldwide. It is followed by Glencore International, which employs 156,000 people, less than half as many as Nestlé. Nestlé is a food company known by all, on the other hand, Glencore International is a trading, brokerage and extraction company of raw materials whose name is less well known. Two pharmaceutical companies appear in this ranking: Novartis and Roche.

Swiss companies with the highest turnover

The top five companies in this ranking are raw materials trading companies. Around 25% of the world’s commodity trading transactions are carried out in Switzerland . This explains the position of these companies in this ranking in terms of turnover. For example, Trafigura, an oil brokerage company, has a turnover of CHF 136 billion and only 4,316 employees! However, in this ranking we find the company Nestlé, which is in 6th position. The pharmaceutical companies Novartis and Roche are respectively in 9th and 8th position in this ranking in terms of turnover.

Accessibility to setting up a business

This graphic explains the capital requirement for setting up a company. As we can see, this cost is zero for France and Italy. This means that no contribution is required to set up a company in these two countries (however, some types of companies still require a contribution). As far as Germany is concerned, it is the country that requires the highest contribution (in % of the GNI per capita) to set up a company. Switzerland is in second position and to create a company in this country, it is necessary to have a capital contribution representing on average 25% of the GNI per capita. Access to setting up a company is therefore more restricted in Germany and Switzerland than in France or Italy. However, the following graph will highlight the taxes on these companies once they have been set up in order to compare the costs charged to Swiss, French, German and Italian companies.

Labor tax and contributions

Although the cost of setting up a company is equal to 0 in France and Italy, the expenses retained (as a % of the profits made) are the most important once the company is set up. On the other hand, for Germany and Switzerland, the costs are high to create the company but the expenses charged once the company is created are lower. For Switzerland, it is the country with the lowest expenses and represents on average 17.7% of the profit generated by the company. By way of comparison, expenses in France represent 50% of the profit generated, i.e. almost three times more than in Switzerland! Thus, for a person who would like to create a company, the choice of Switzerland seems more favourable. Of course, funds will have to be found to be able to set up the company initially, but taxation will be more favourable there in the long term.

Conclusion